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FOR IMMEDIATE RELEASE
MEXICO CITY - MAY 18, 2023 02:03 PM (EDT)
AM Best has affirmed the Financial Strength Rating of B++ (Good) and the Long-Term Issuer Credit Rating of “bbb” (Good) of Nacional de Seguros S.A. Compañía de Seguros Generales (Nacional de Seguros) (Bogota, Colombia). The outlook of these Credit Ratings (ratings) is stable.
The ratings reflect Nacional de Seguros’ balance sheet strength, which AM Best assesses as very strong, as well as its adequate operating performance, limited business profile and appropriate enterprise risk management.
The ratings also reflect the company’s very strong level of risk-adjusted capitalization, as measured by Best’s Capital Adequacy Ratio (BCAR), and the profitability Nacional de Seguros has achieved during its relatively short track record. Partially offsetting these positive rating factors is the small size of the company, which limits business diversification given the inherent concentration risk, and a high dependence on reinsurance.
Nacional de Seguros began operations in 2014 after acquiring Ecoseguros S.A., a company in voluntary liquidation, with fulfillment and liability insurance licenses granted by the Colombian Financial Superintendence. Nacional de Seguros had less than a 2% market share in Colombia’s property/casualty segment, as of December 2022, and is the third-largest company in the fulfillment insurance sector with a 13% market share.
Nacional de Seguros’ risk-adjusted capitalization stands at the very strong level, as measured by BCAR, and is supported by a comprehensive reinsurance program and its consistent historical profitability. Credit risk, driven by reinsurance recoverables, is the main factor that could impact the company’s BCAR assessment.
Business operations are focused exclusively on Colombia; 81% of premiums proceed from Bogota, 11% from Medellin, and 8% from other cities.
Despite reporting fluctuations in gross premiums, the company has maintained a steady retention level, and constant profitability. Underwriting metrics are characterized by contained loss ratios, and negative acquisition cost ratios due to Nacional de Seguros’ high ceding profile. The company’s investment income has exhibited a stable trend in the past few years, moderately supporting Nacional de Seguros’ income generation.
AM Best does not expect positive rating actions in the medium term. Negative rating actions could occur if there is a significant increase in its business risk, as a result of negative consequences of high reinsurance dependence, or if by any other means, risk-adjusted capitalization becomes unsupportive of the current ratings. Negative rating actions also could occur if operating performance metrics deteriorate to the point of no longer being consistent with the adequate assessment.
The methodology used in determining these ratings is Best’s Credit Rating Methodology (Version Nov. 13, 2020), which provides a comprehensive explanation of AM Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.
Key insurance criteria reports utilized:
View a general description of the policies and procedures used to determine credit ratings. For information on the meaning of ratings, structure, voting and the committee process for determining the ratings and monitoring activities, please refer to Guide to Best’s Credit Ratings.
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